Question

Garcia Company issues 9.50%, 15-year bonds with a par value of $410,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 13.50%, which implies a selling price of 79 1/2. The effective interest method is used to allocate interest expense.

1. Using the implied selling price of 79 1/2, what are the issuer's cash proceeds from issuance of these bonds.

2. What total amount of bond interest expense will be recognized over the life of these bonds?

3. What amount of bond interest expense is recorded on the first interest payment date?

QS 14-14B Effective Interest: Bond discount computations LO P5 Garrin Cnmpany issues 9 50% 15-year hnncs with a par value of乐410000 and semiannual interest payments On the issue date, the annual ridt kel idle fl [hese bonds s 13-50%, which irriples d seling price of 79 12 The effective interest trielhud is used tu eliccate interest expense. 1. Using the mplied selling price of 79 1/2, what ate the issuer's cash prcceeds from issuarnce of these bonds 5 325,050 2. What total amount of bond interest expense will be recognizecl over the lite of these bonds? Amount rap paymants of Par valua at maturity Total repayments Less amount bornawad hom part 1) Totel bund interest eapense 3. What amount ot bond interest expense is recordled on the tirst interest payment date? d interest

Answer 1